6.4. Work Opportunity Tax Credit (for Employers)
Federal WORK OPPORTUNITY TAX CREDIT (for employers) including New York State program information
The Work Opportunity Tax Credit (WOTC) is designed to promote the hiring of individuals who qualify as a member of a target group; for example, businesses can receive up to $2,400 in federal tax savings for hiring low-income individuals with barriers to employment. Two target groups have been established as part of the American Recovery and Reinvestment Act of 2009. These new groups cover unemployed veterans and disconnected youth who begin working for the employer in 2009 and 2010. Federal tax credits are available for hiring the following groups under WOTC:
A. Qualified recipient of Temporary Assistance to Needy Families (TANF) or its predecessor program Aid to Families with Dependent Children (AFDC)
Is any individual who is a member of a family receiving TANF, or its predecessor AFDC, for any 9 months during the last 18 months ending on the hire date, or
Is a member of the family specifically listed on the grant as shown through the Department of Social Services
B. Qualified Veterans
A Veteran who is a member of a family receiving assistance under the SNAP Food Stamp Program for at least a 3- month period during the 15-month period ending on the hiring date, and Has served on active duty (other than active duty for training) in the Armed Forces of the United States for a period of more than 180 days, or was discharged or released from active duty in the Armed Forces of the United States for a service-connected disability, and Did not have any day during the 60-day period ending on the hiring date, which was a day of "extended active duty" in the Armed Forces of the United States. The term "extended active duty" means a period of more than 90 days during which the individual was on active duty for training.
A Disabled Veteran who is entitled to at least 10 percent compensation for a service-connected disability who: was hired within one year of having been discharged or released from active duty, and has been unemployed for a collective amount of 6 of the last 12 months prior to the date of the hire.
An Unemployed Veteran that has served on active duty for more than 180 days, or has been discharged from active duty for a service connected disability; and has been discharged from active duty any time during the 5-year period ending on the hire date; and has received unemployment compensation for not less than 4 weeks during the one year period ending on the hire date. Employment must have begun after 12/31/2008.
C . Qualified ex-felon hired no later than one year after conviction or release from prison
Has been convicted of a felony under any statute of the United States or any state,
Has a hiring date, which is not more than one year after the later of the date on which he/ she was so convicted or on which he/she was released from prison.
D. Disconnected Youth
Individuals between the ages of 16 and 25 that have not been regularly employed or have not attended school in the past 6 months, AND do not have a certificate of graduation from a secondary school or a GED.
E. Designated Community Residents ages 18 through 39
Is at least age 18, but not yet age 39, on the hiring date, and
Has his/her principal residence within a federal designated community (Empowerment Zone, Renewal Community or Rural Renewal County). In New York State, Montgomery and Clinton counties have been designated as "Rural Renewal Communities."
F. Qualified Vocational Rehabilitation Referral
Is a person certified by a designated agency as having a physical or mental disability which, for that individual, constitutes or results in a substantial barrier to employment, and
Was referred to the employer upon, or at any time after completing, or while receiving rehabilitation services pursuant to an individualized written plan for employment approved by one of the following organizations:
U.S. Department of Veterans Affairs
Vocational and Educational Services for Individuals with Disabilities (VESID)
The Commission for the Blind and Visually Handicapped (CBVH)
Ticket to - Work Employment Network (EN)
G. Designated Community Resident Youth ages 16-17
Performs a service for the employer between May 1 and September 15 of the respective tax year, and
Has attained the age of 16, but not yet age 18, on the hiring date, and
Has not been employed by the same employer prior to the 90 day (summer) period between May 1 and September 15 of the respective tax year, and
Has her/his place of living within a federal designated community (Empowerment Zone, Renewal Community). In the case of a Summer Youth, the phrase "qualified wages" includes wages paid or incurred for services performed while he/ she lived within the zone.
H. Qualified Supplemental Nutrition Assistance Program (SNAP) recipient ages 18-39
Has attained the age of 18, but not yet age 40, on the hiring date, and
Is a member of a family receiving assistance under a Food Stamp Program through the Food Stamp Act of 1977 for a 6 consecutive month period ending on the hire date, or
Has received such assistance for at least three of the 5 months before date of hire, and whose food stamp eligibility has expired.
I. Qualified recipient of Supplemental Security Income (SSI)
Has received or is receiving Supplemental Security income benefits under Title XVI of the Social Security Act (including benefits of the type described in Section 1616 of the Social Security Act or Section 212 of Public Law 93-66) for at least one day in any month within the 60-day period ending on the hiring date.
J. Long Term Family Assistance (LTFA) -WOTC
*(Formerly welfare to work tax credit)
Long-Term Family Assistance (LTFA) Recipients who began work any time after December 31, 1997 can qualify their employers for the WOTC Long-Term Family Assistance Credit (LTFA) of up to $9,000 per new hire. The individual must be either the recipient or member of a family:
That received TANF or AFDC for a total of at least 18 months, for the period accruing back to August 5, 1997 as of the time of hire, or
That received Temporary Assistance for Needy Families (TANF) or its predecessor program, Aid to Families with Dependent Children (A FDC), for at least the 18 consecutive months before the date of hire, or
Whose TANF or AFDC eligibility expired under federal or state law after August 5,
1997 for individuals hired within two years after their eligibility expired.
NOT E: New York State allows up to 60 months of TANF grant benefits. Individuals
transitioning to New York's Safety Net program are eligible for the LT FA-WOTC credit for up to 24 months
WOTC APPLICATION GUIDE
The Work Opportunity Tax Credit Program (WO TC) is designed to encourage employers to hire job seekers with barriers to employment. The information contained in this booklet incorporates federal legislative revisions effective October 1, 1997 and as amended through August 31, 2011.
Employers who hire WOTC-qualified employees are eligible for one of three possible federal tax credits. Employees must start work during the period from October 1, 1997 through August 31, 2011; must be certified eligible for W OTC; and must perform a minimum of 120 hours of service in order to generate a tax credit for their employers.
The Full Rate - A WOTC credit equal to 40% of the first $6,000 in qualified first year wages, for a maximum credit of $2,400. The WOTC-certified employee must work a minimum of 400 hours or 180 days of service for the employer.
The Disabled Veterans Rate (DAV) A WOTC credit equal to 40 % of the first $12,000 in qualified first-year wages for a maximum credit of $4,800. The WOTC employee must work a minimum of 400 hours or 180 days of service to the employer.
The Long Term Family Assistance Rate (LTFA) -A LTFA-WOTC credit of up to $4,000 for their first year and $5,000 for their second year of employment. New WOTC-LTFA hires employed 400 hours or 180 days of service to qualify their employees for a credit totaling 40% of the first $10,000 of qualified wages for the first year of employment and 50% of the first $10,000 of qualified wages for the second year. Combined, a two year total of $9,000 per new hire.
The Reduced Rate - - A WOTC credit equal to 25% of the first $6,000 in qualified first year wages, for a maximum credit of $1,500. The WOT C-certified employee must perform at least 120 hours, but less than 400 hours, of service for the employer.
The Reduced DAV Rate A WOTC credit equal to 35% of the first $12,000 in qualified first year wages for a maximum credit of $3,000. The WOTC employee must work a minimum of 120 hours of service to the employer.
The Reduced LTFA Rate -- A credit equal to 25% of t he first $10,000 of the first year or second year wages can generate credits up to $2,500 for each of the two years. The WOTC-LTFA certified employee must perform at lea st 120 hours, but less than 400 hours, of service for the employer.
The Summer Youth Rate - - A credit of 25% of the first $3,000 in any 90-day period between May 1, and September 15 of a calendar year for a maximum credit of $750. The employee, certified as a Summer Youth, must work at least 120 hours for the employer.
PRE-SCREENING NOTICE and CERTIFICATION REQUEST IRS FORM 8850
For the employer to be eligible for a WOTC credit, a Pre-Screening Notice (PSN), IRS Form 8850, must be filled out by the job applicant and the employer on or before the hire date. The Pre-Screening Notice must be completed, signed, and postmarked within 28 days after the first day of work and must be submitted to the New York State Department of Labor. The Internal Revenue Service requires original signatures on IRS Form 8850. Form 8850 is the single most important form in the WOTC Program.
THE INDIVIDUAL CHARACTERISTIC FORM (ICF) ETA 9061
The Labor Department uses the Individual Characteristic Form (ICF) ETA 9061, to gather statistical information and target group eligibility information from employers. This form is available from our WOTC Unit or your local Labor Department employment office. A separate ICF (or in certain instances the Conditional Certification Form, ETA 9062 ) must be completed and returned to the Department of Labor for each WOTC applicant.
The WOTC Unit issues WOTC certifications after ensuring that a worker meets the required eligibility characteristics of a WOTC target group. A WOTC certificate may be revoked if it is based on false information.
HOW TO APPLY FOR THE WOTC CREDIT
To apply for certification that qualifies a new hire for one of these tax credits, employers need only complete two simple forms:
IRS Pre-Screening Notice Form 8850, by the hire date, and U.S. Department of Labor ETA Individual Characteristics Form 9061 (or ETA 9062, if the job applicant has already been conditionally certified), and
WOTC Unit New York State Department of Labor Building 12 Room 200
State Office Building Campus
Albany, New York 12240
NOTE: The IRS 8850 must be post marked within 28 days of the new hire's first day of work.